ACCT 444 Week 2 Quiz

statistical sampling techniques were not used on the audit engagement.
the auditor planned the audit in a negligent manner.
accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.
the fraud was perpetrated by one employee who circumvented the existing internal controls.

if a client has strong internal controls.
if a client follows generally accepted accounting principles (GAAP).
when the auditor has complied with generally accepted auditing standards (GAAS).
under no circumstances can this risk be completely eliminated.

has failed to establish legal standing before the court.
does not have privity of contract and is unknown to the contracting parties.
does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

may establish legal standing before the court after a contract has been consummated.

there are more torts than contracts.
the burden of proof is on the auditor rather than on the person suing.
the person suing need prove only negligence.
the amounts recoverable are normally larger.

in accordance with auditing standards.
as effectively as reasonably possible.
in a timely manner.
only after an adequate investigation of the management team.

An error is unintentional, whereas fraud is intentional.
Frauds occur more often than errors in financial statements.
Errors are always fraud and frauds are always errors.
Auditors have more responsibility for finding fraud than errors.

share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.

enhance
reduce
increase
increase or decrease

Significant accounting estimates involving subjective judgments
Significant personal financial obligations
Management’s practice of making overly aggressive forecasts
High turnover of accounting, internal audit and information technology staff

Employees who handle cash receipts are not bonded.
The entity’s industry is experiencing declining customer demand.
Internal auditors have direct access to the board of directors and the entity’s management.
The board of directors is active in overseeing the entity’s financial reporting policies.